Fidelity is doubling down on Bitcoin mining in the lead up to the halving
Is Fidelity betting on a massive Bitcoin price rise in 2020?
Fidelity is one of the world's largest financial services firms, administering north of $7 trillion in assets for tens of millions of clients. It's also relatively deeply involved in cryptocurrency, prominently launching Fidelity Digital Assets to offer cryptocurrency custody and trading services.
It's also involved in cryptocurrency mining. As Fidelity CEO Abigail Johnson explained it in 2017, the company "set up a small Bitcoin and Ethereum mining operation... that miraculously now is actually making a lot of money".
But the intervening years haven't been entirely kind to miners. While Bitcoin's descent from 2017's $20,000 quickly drove many of the most dubious mining schemes out of business, it was the $3,000 Bitcoin price range in late 2018 that really hit miners where it hurt.
This is well-evidenced by the hashrate trough that runs from about November 2018 to May 2019, which is essentially the same time frame during which Bitcoin prices were under $5,000.
But as prices recovered, Bitcoin's hashrate climbed back, breaking a new all-time high at the start of 2020, and naturally bringing new mining difficulty peaks with it. This is setting the stage in an interesting way for the next Bitcoin halving, expected in May 2020.
The halving will see the amount of Bitcoin distributed to miners cut in half. In itself, this would push many miners out of business and drastically cut profits for those that survive.
Consequently, the halving will result in one of two things:
- Bitcoin mining becomes wildly unprofitable. Miners go out of business and hashrates decline in the months following the halving.
- Bitcoin prices rise enormously, compensating for the lost miner revenue. Hashrates continue to increase and mining continues to be profitable.
No one is entirely sure which of these two things will happen, or whether it will be a combination of both, but it's safe to say that anyone investing in Bitcoin mining right now, with the halving so close, is strongly leaning towards option number two.
And right now, Fidelity is doing exactly that. Last month, Fidelity Digital Assets posted a job ad for a Bitcoin mining engineer, who will be responsible for designing, building and maintaining the infrastructure for scaling up the Fidelity Digital Assets mining business.
"Passion for Bitcoin is required," it adds.
In short, assuming Fidelity isn't actively trying to invest into a soon-to-be-unprofitable area, we can conclude that one of the world's largest financial services firms is tacitly anticipating a substantial Bitcoin price rise within roughly the next five months.
Disclosure: The author holds BNB and BTC at the time of writing.